Dec. 12 (Bloomberg) -- The Federal Reserve refused a request
by Bloomberg News to disclose the recipients of more than $2
trillion of emergency loans from U.S. taxpayers and the assets
the central bank is accepting as collateral.

Bloomberg filed suit Nov. 7 under the U.S. Freedom of
Information Act requesting details about the terms of 11 Fed
lending programs, most created during the deepest financial
crisis since the Great Depression.

The Fed responded Dec. 8, saying it's allowed to withhold
internal memos as well as information about trade secrets and
commercial information. The institution confirmed that a records
search found 231 pages of documents pertaining to some of the
requests.

"If they told us what they held, we would know the potential
losses that the government may take and that's what they don't
want us to know," said Carlos Mendez, a senior managing director
at New York-based ICP Capital LLC, which oversees $22 billion in
assets.

The Fed stepped into a rescue role that was the original
purpose of the Treasury's $700 billion Troubled Asset Relief
Program. The central bank loans don't have the oversight
safeguards that Congress imposed upon the TARP.

Total Fed lending exceeded $2 trillion for the first time
Nov. 6. It rose by 138 percent, or $1.23 trillion, in the 12
weeks since Sept. 14, when central bank governors relaxed
collateral standards to accept securities that weren't rated AAA.

'Been Bamboozled'

Congress is demanding more transparency from the Fed and
Treasury on bailout, most recently during Dec. 10 hearings by the
House Financial Services committee when Representative David
Scott, a Georgia Democrat, said Americans had "been bamboozled."

Bloomberg News, a unit of New York-based Bloomberg LP, on
May 21 asked the Fed to provide data on collateral posted from
April 4 to May 20. The central bank said on June 19 that it
needed until July 3 to search documents and determine whether it
would make them public. Bloomberg didn't receive a formal
response that would let it file an appeal within the legal time
limit.

On Oct. 25, Bloomberg filed another request, expanding the
range of when the collateral was posted. It filed suit Nov. 7.

In response to Bloomberg's request, the Fed said the U.S. is
facing "an unprecedented crisis" in which "loss in confidence in and between financial institutions can occur with lightning speed and devastating effects."

Data Provider

The Fed supplied copies of three e-mails in response to a
request that it disclose the identities of those supplying data
on collateral as well as their contracts.

While the senders and recipients of the messages were
revealed, the contents were erased except for two phrases
identifying a vendor as "IDC." One of the e-mails' subject
lines refers to "Interactive Data -- Auction Rate Security Advisory May 1, 2008."

Brian Willinsky, a spokesman for Bedford, Massachusetts-
based Interactive Data Corp., a seller of fixed-income securities
information, declined to comment.

"Notwithstanding calls for enhanced transparency, the Board
must protect against the substantial, multiple harms that might
result from disclosure," Jennifer J. Johnson, the secretary for
the Fed's Board of Governors, said in a letter e-mailed to
Bloomberg News.

'Dangerous Step'

"In its considered judgment and in view of current
circumstances, it would be a dangerous step to release this
otherwise confidential information," she wrote.

New York-based Citigroup Inc., which is shrinking its global
workforce of 352,000 through asset sales and job cuts, is among
the nine biggest banks receiving $125 billion in capital from the
TARP since it was signed into law Oct. 3. More than 170 regional
lenders are seeking an additional $74 billion.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry
Paulson said in September they would meet congressional demands
for transparency in a $700 billion bailout of the banking system.

The Freedom of Information Act obliges federal agencies to
make government documents available to the press and public. The
Bloomberg lawsuit, filed in New York, doesn't seek money damages.

'Right to Know'

"There has to be something they can tell the public because
we have a right to know what they are doing," said Lucy Dalglish, executive director of the Arlington, Virginia-based
Reporters Committee for Freedom of the Press.

"It would really be a shame if we have to find this out 10
years from now after some really nasty class-action suit and our
financial system has completely collapsed," she said.

The Fed lent cash and government bonds to banks that handed
over collateral including stocks and subprime and structured
securities such as collateralized debt obligations, according to
the Fed Web site.

Banks oppose any release of information because that might
signal weakness and spur short-selling or a run by depositors, Scott Talbott, senior vice president of government affairs for
the Financial Services Roundtable, a Washington trade group, said
in an interview last month.

'Complete Truth'

"Americans don't want to get blindsided anymore," Mendez
said in an interview. "They don't want it sugarcoated or
whitewashed. They want the complete truth. The truth is we can't take all the pain right now."

The Bloomberg lawsuit said the collateral lists "are
central to understanding and assessing the government's response to the most cataclysmic financial crisis in America since the Great Depression."

In response, the Fed argued that the trade-secret exemption
could be expanded to include potential harm to any of the central
bank's customers, said Bruce Johnson, a lawyer at Davis Wright Tremaine LLP in Seattle. That expansion is not contained in the
freedom-of-information law, Johnson said.

"I understand where they are coming from bureaucratically,
but that means it's all the more necessary for taxpayers to know
what exactly is going on because of all the money that is being
hurled at the banking system," Johnson said.

The Bloomberg lawsuit is Bloomberg LP v. Board of Governors
of the Federal Reserve System, 08-CV-9595, U.S. District Court,
Southern District of New York (Manhattan).